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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Energy Partners, Ltd.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
(ENERGY PARTNERS, LTD. LOGO)
201 ST. CHARLES AVENUE
SUITE 3400
NEW ORLEANS, LOUISIANA 70170
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 2005
Notice is hereby given that the 2005 Annual Meeting of Stockholders of
Energy Partners, Ltd. (the "Company"), a Delaware corporation, will be held at
the Hotel InterContinental New Orleans, Vieux Carre B Room, 444 St. Charles
Ave., New Orleans, Louisiana 70130, on Thursday, May 12, 2005, at 9:00 a.m.,
Central Daylight Time, for the following purposes:
(1) to elect ten (10) directors to hold office until the Annual
Meeting of Stockholders in the year 2006 and until their successors are
duly elected and qualified;
(2) to approve the Amended and Restated 2000 Stock Incentive Plan for
Non-Employee Directors;
(3) to ratify the appointment of KPMG LLP as the Company's independent
registered public accountants for the year ended December 31, 2005; and
(4) to transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
Only stockholders of record at the close of business on March 16, 2005 (the
"Record Date") will be entitled to notice of, and to vote at, the 2005 Annual
Meeting, or any adjournment thereof, notwithstanding the transfer of any stock
on the books of the Company after the Record Date. A list of these stockholders
will be open for examination by any stockholder for any purpose germane to the
2005 Annual Meeting for a period of ten (10) days prior to the meeting at the
Company's principal executive offices at 201 St. Charles Ave., Suite 3400, New
Orleans, Louisiana 70170.
By Order of the Board of Directors,
/s/ John H. Peper
JOHN H. PEPER
Executive Vice President, General
Counsel and Corporate Secretary
New Orleans, Louisiana
April 4, 2005
PLEASE RETURN THE ENCLOSED PROXY CARD TODAY, WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING IN PERSON. STOCKHOLDERS WHO ATTEND THE 2005 ANNUAL MEETING MAY
REVOKE THEIR PROXIES AND VOTE IN PERSON.
ENERGY PARTNERS, LTD.
201 ST. CHARLES AVENUE
SUITE 3400
NEW ORLEANS, LOUISIANA 70170
The 2004 Annual Report to Stockholders, including audited financial
statements, is being mailed to stockholders, together with these proxy
materials, on or about April 4, 2005.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 2005
This Proxy Statement is furnished to the stockholders of Energy Partners,
Ltd. (the "Company") in connection with the solicitation of proxies by the Board
of Directors of the Company (the "Board of Directors" or the "Board") for use at
the Annual Meeting of Stockholders of the Company to be held on Thursday, May
12, 2005 at the Hotel InterContinental New Orleans, Vieux Carre B Room, 444 St.
Charles Ave., New Orleans, Louisiana 70130 at 9:00 a.m., Central Daylight Time
(the "2005 Annual Meeting" or the "Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders.
ABOUT THE 2005 ANNUAL MEETING
VOTING PROCEDURES
Stockholders of record at the close of business on March 16, 2005 (the
"Record Date") will be entitled to vote at the Meeting. On the Record Date,
there were outstanding and entitled to vote 36,177,638 shares of the Company's
Common Stock (the "Company Shares" or the "Common Stock"). The holders of a
majority of the Company Shares issued and outstanding and entitled to vote at
the Meeting, present in person or represented by proxy, will constitute a
quorum. The person(s) whom the Company appoints to act as inspector(s) of
election will treat all Company Shares represented by a returned, properly
executed proxy as present for purposes of determining the existence of a quorum
at the Meeting. The Company Shares present at the meeting, in person or by
proxy, that are abstained from voting will be counted as present for determining
the existence of a quorum.
Each of the Company Shares will entitle the holder to one vote. Cumulative
voting is not permitted. All matters to be submitted to the stockholders require
an affirmative vote of the majority of votes present in person or represented by
proxy and entitled to vote, provided that directors are elected by a plurality
of the votes of the shares present in person or represented by proxy and
entitled to vote at the meeting. Other than with respect to the election of
directors, an abstention is counted as a vote against a matter to be presented
at the Meeting. A broker non-vote is not entitled to be voted and therefore will
not affect the outcome on any proposal in the Proxy Statement. A broker
"non-vote" occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power with respect to that item and the broker has not received voting
instructions from the beneficial owner. Votes cast at the meeting will be
counted by the inspector(s) of election.
The Board of Directors is soliciting your proxy on the enclosed Proxy Card
to provide you with an opportunity to vote on all matters to come before the
meeting, whether or not you attend in person. If you execute and return the
enclosed Proxy Card, your shares will be voted as you specify. If you make no
specifications, your shares will be voted in accordance with the recommendations
of the Board, as set forth below. If you submit a Proxy Card, you may
subsequently revoke it by submitting a revised proxy or a written revocation at
any time before your original proxy is voted. You may also attend the meeting in
person and vote in person by ballot, which would cancel any proxy you previously
gave.
The Board of Directors urges you to vote, and solicits your proxy, as
follows:
(1) FOR the election of ten (10) nominees for membership on the
Company's Board of Directors, Messrs. Bachmann, Bumgarner, Carlisle,
Carter, Dawkins, Gershen, Herrin, Hiltz and Phillips and Dr. Francis, to
serve until the Annual Meeting of Stockholders in the year 2006 and until
their successors are duly elected and qualified;
(2) FOR the approval of the Amended and Restated 2000 Stock Incentive
Plan for Non-Employee Directors;
(3) FOR the ratification of the appointment of KPMG LLP as the
Company's independent registered public accountants for the year ending
December 31, 2005; and
(4) At the discretion of the designated proxies named on the enclosed
Proxy Card, on any other matter that may properly come before the 2005
Annual Meeting, and any adjournment or postponement thereof.
PROXY SOLICITATION
Your proxy is being solicited by and on behalf of the Board of Directors of
the Company. The expense of preparing, printing and mailing proxy solicitation
materials will be borne by the Company. In addition to solicitation of proxies
by mail, certain directors, officers, representatives and employees of the
Company may solicit proxies by telephone and personal interview. Such
individuals will not receive additional compensation from the Company for
solicitation of proxies, but may be reimbursed by the Company for reasonable
out-of-pocket expenses in connection with such solicitation. In addition, D.F.
King & Co. has been retained to aid in the solicitation at an estimated fee of
$8,500. Banks, brokers and other custodians, nominees and fiduciaries also will
be reimbursed by the Company, as necessary, for their reasonable expenses for
sending proxy solicitation materials to the beneficial owners of Common Stock.
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OWNERSHIP OF COMMON AND PREFERRED STOCK BY
MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table shows the number of shares of Common Stock beneficially
owned by each director and nominee for director; by the Company's chief
executive officer; by the five other most highly compensated executive officers
of the Company; by all directors and executive officers as a group; and by such
persons known to the Company to own beneficially more than five (5%) of the
outstanding Common Stock of the Company.
The information set forth below is as of the Record Date and is based upon
information supplied or confirmed by the named individuals:
PERCENT OF
COMMON COMMON
BENEFICIAL OWNER SHARES SHARES(1)
---------------- --------- ----------
Richard A. Bachmann(2)...................................... 2,861,185 7.9
Suzanne V. Baer(3).......................................... 584,533 1.6
John C. Bumgarner, Jr.(4)................................... 47,928 *
Jerry D. Carlisle(5)........................................ 14,174 *
Harold D. Carter(4)......................................... 39,407 *
Enoch L. Dawkins(6)......................................... 7,178 *
T. Rodney Dykes(7).......................................... 51,801 *
William Flores, Jr.(8)...................................... 28,836 *
Dr. Norman D. Francis(9).................................... -- *
Robert D. Gershen(4)........................................ 40,974 *
Phillip A. Gobe............................................. -- *
William R. Herrin(9)........................................ -- *
William O. Hiltz(10)........................................ 105,993 *
Dr. Eamon M. Kelly(4)....................................... 29,062 *
John H. Peper(11)........................................... 258,459 *
John G. Phillips(4)......................................... 37,161 *
All directors and executive officers as a group (14
persons).................................................. 4,106,691 11.0
Amaranth LLC(12)............................................ 1,914,843 5.2
Sagamore Hill Capital Management L.P.(13)................... 1,910,171 5.0
---------------
* Represents beneficial ownership of less than 1%.
(1) Percentage ownership of a holder or class of holders is calculated by
dividing (1) the number of shares of Common Stock, including restricted
shares, outstanding attributed to such holder or class of holders, as the
case may be, plus the total number of shares of Common Stock underlying
options exercisable within sixty days from March 16, 2005 and warrants held
by such holder or class of holders, as the case may be, by (2) the total
number of shares of Common Stock outstanding plus the total number of
shares of Common Stock underlying options exercisable within sixty days
from March 16, 2005 and warrants held by such holder or class of holders,
as the case may be, but not Common Stock underlying such securities held by
any other person.
(2) Based on an amended Schedule 13G and ownership reports filed with the
Securities and Exchange Commission. Includes 885,898 shares of Common Stock
pledged to support obligations incurred in three separate transactions
under a Forward Purchase Agreement. Mr. Bachmann retains voting rights with
respect to these shares. The number of shares to be delivered commencing in
June 2007 pursuant to such agreement will be based on the market price of
the Company's Common Stock and will not exceed 885,898 shares. Mr. Bachmann
has the right to deliver cash instead of shares of Common Stock. Also
includes (i) 288,890 shares of Common Stock subject to options granted to
Mr. Bachmann under
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our Amended and Restated 2000 Long Term Stock Incentive Plan, which may be
exercised within 60 days from March 16, 2005, (ii) 1,053 shares of Common
Stock beneficially owned by Mr. Bachmann and held in trust by the Energy
Partners, Ltd. 401(k) Plan. and (iii) 500 shares beneficially owned by Mr.
Bachmann's wife. The address for Mr. Bachmann is Energy Partners, Ltd., 201
St. Charles Avenue, Suite 3400, New Orleans, Louisiana 70170.
(3) Includes 438,667 shares of Common Stock subject to options granted to Ms.
Baer under our Amended and Restated 2000 Long Term Stock Incentive Plan,
which may be exercised within 60 days from March 16, 2005. Also includes
256 shares of Common Stock beneficially owned by Ms. Baer and held in trust
by the Energy Partners, Ltd. 401(k) Plan.
(4) Includes 20,000 shares of Common Stock subject to options granted under our
2000 Stock Option Plan for Non-Employee Directors to each of Messrs.
Bumgarner, Carter, Gershen and Phillips and Dr. Kelly, which are currently
exercisable. Also includes 12,283 and 1,993 phantom shares accrued for
Messrs. Bumgarner and Gershen under our Stock and Deferral Plan for
Non-Employee Directors.
(5) Includes 10,000 shares of Common Stock subject to options granted under our
2000 Stock Option Plan for Non-Employee Directors which are currently
exercisable. Includes 500 shares of Common Stock beneficially owned by Mr.
Carlisle's wife of which Mr. Carlisle disclaims beneficial ownership.
(6) Includes 6,000 shares of Common Stock subject to options granted to Mr.
Dawkins under our 2000 Stock Option Plan for Non-Employee Directors which
are currently exercisable.
(7) Includes 47,556 shares of Common Stock subject to options granted to Mr.
Dykes under our Amended an Restated 2000 Long Term Stock Incentive Plan,
which may be exercised within 60 days of March 16, 2005. Also includes 761
shares of Common Stock beneficially owned by Mr. Dykes and held in trust by
the Energy Partners, Ltd. 401(k) Plan.
(8) Includes 8,667 shares of Common Stock subject to options granted to Mr.
Flores under our Amended and Restated 2000 Long Term Stock Incentive Plan,
which may be exercised within 60 days of March 16, 2005.
(9) Dr. Francis and Mr. Herrin are standing for election for the first time at
the 2005 Annual Meeting of Stockholders.
(10) Includes 4,000 shares of Common Stock subject to options granted under our
2000 Stock Option Plan for Non-Employee Directors to Mr. Hiltz, which are
currently exercisable, and 1,993 phantom shares accrued for Mr. Hiltz under
our Stock and Deferral Plan for Non-Employee Directors.
(11) Includes 106,055 shares of Common Stock subject to options granted to Mr.
Peper under our Amended and Restated 2000 Long Term Stock Incentive Plan,
which may be exercised within 60 days from March 16, 2005 and 116,713
warrants granted in the acquisition of Hall-Houston, which are currently
exercisable. Also includes 533 shares of Common Stock beneficially owned by
Mr. Peper and held in trust by the Energy Partners, Ltd. 401(k) Plan.
(12) Based on an amended Schedule 13G filed with the Securities and Exchange
commission on February 10, 2005 for shares held by Amaranth LLC, Amaranth
Advisors L.L.C. and Nicholas M. Maounis, as managing member of Amaranth
Advisors L.L.C. (collectively, "Amaranth"). Includes 1,008,025 shares of
Common Stock and 906,818 warrants held by Amaranth. The address for
Amaranth is One American Lane, Greenwich, Connecticut 06831.
(13) Based on an amended Schedule 13G filed with the Securities and Exchange
Commission on February 11, 2005, for shares held by Sagamore Hill Capital
Management L.P., Sagamore Hill Managers LLC and Steven H. Bloom, as sole
member of Sagamore Hill Managers LLC (collectively, "Sagamore Hill"). The
address for Sagamore Hill is 10 Glenville Street, 3rd Floor, Greenwich,
Connecticut 06831.
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MATTERS TO BE PRESENTED TO THE STOCKHOLDERS AT THE 2005 ANNUAL MEETING
ITEM 1 -- ELECTION OF DIRECTORS
At the 2005 Annual Meeting, ten (10) directors are to be elected, each of
whom will serve until the Annual Meeting of Stockholders in the year 2006 and
until their respective successors are duly elected and qualified. The persons
named as proxies on the enclosed Proxy Card intend to vote FOR the election of
each of the ten (10) nominees listed below, unless otherwise directed.
The Board has nominated, and the proxies will vote to elect, the following
individuals as members of the Board of Directors to serve for a period of one
(1) year and until their respective successors are duly elected and qualified:
Richard A. Bachmann, John C. Bumgarner, Jerry D. Carlisle, Harold D. Carter,
Enoch L. Dawkins, Dr. Norman D. Francis, Robert D. Gershen, William R. Herrin,
William O. Hiltz and John G. Phillips. Each nominee has consented to be
nominated and to serve, if elected.
Under the Company's Corporate Governance Guidelines, a majority of the
Board must be comprised of directors who are independent under the rules of the
New York Stock Exchange. The Board has adopted categorical standards to assist
it in making determinations of independence for directors. The standards are
attached as Annex A to this Proxy Statement.
The Board has determined that each of Messrs. Bumgarner, Carlisle, Carter,
Gershen, Herrin, Hiltz and Phillips and Dr. Francis is independent. Mr. Bachmann
was determined to be not independent because he is our president and chief
executive officer. Mr. Dawkins was determined to be not independent because one
of his immediate family members (as defined in the New York Stock Exchange
rules) is a consulting principal of KPMG LLP, our independent registered public
accountant. We have been advised by the New York Stock Exchange that Mr. Dawkins
can remain a member of our Compensation Committee until our annual meeting in
2006 under the Exchange's director independence transition rules.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
TEN (10) NOMINEES: MESSRS. BACHMANN, BUMGARNER, CARLISLE, CARTER, DAWKINS,
GERSHEN, HERRIN, HILTZ AND PHILLIPS AND DR. FRANCIS.
INFORMATION ABOUT THE NOMINEES
Richard A. Bachmann, age 60, has been president and chief executive officer
of the Company and chairman of its Board of Directors since the Company's
incorporation in January 1998. Mr. Bachmann began organizing the Company in
February 1997. From 1995 to January 1997, he served as director, president and
chief operating officer of The Louisiana Land and Exploration Company ("LL&E"),
an independent oil and gas exploration company. From 1982 to 1995, Mr. Bachmann
held various positions with LL&E, including director, executive vice president,
chief financial officer and senior vice president of finance and administration.
From 1978 to 1981, Mr. Bachmann was the treasurer of Itel Corporation. Prior to
1978, Mr. Bachmann served with Exxon International, Esso Central America, Esso
InterAmerica and Standard Oil of New Jersey. He is also a director of Trico
Marine Services, Inc.
John C. Bumgarner, Jr., age 62, has been a director since January 2000. Mr.
Bumgarner is currently serving as managing member of Utica Plaza Management
Company, a family-owned real estate company. Mr. Bumgarner was chief operating
officer and president of strategic investments for Williams Communications
Group, Inc., a high technology company, from May 2001 to November 2002. Williams
Communications Group, Inc. filed a Plan of Reorganization with the U.S.
Bankruptcy Court for the Southern District of New York in August 2002. Mr.
Bumgarner joined The Williams Companies, Inc. in 1977 and served as senior vice
president of Williams Corporate Development and Planning and then also served as
president of Williams International Company prior to joining Williams
Communications Group, Inc. Mr. Bumgarner is also a director of Management
Planning Systems, Inc. and Sirenza Microdevices, Inc. Mr. Bumgarner is a former
treasurer of Skelly Oil.
Jerry D. Carlisle, age 59, has been a director since March 2003. Mr.
Carlisle has been vice president and director of DarC Marketing, Inc., a
family-owned marketing company, since 1997. From 1983 to 1997,
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Mr. Carlisle was vice president, controller and chief accounting officer of LL&E
and, from 1979 to 1983, he held various management positions at LL&E. Mr.
Carlisle has a masters of business administration from Loyola University, is a
certified public accountant, and serves as a trustee of the Mississippi State
University Business School.
Harold D. Carter, age 66, has been a director since May 1998. Since 1995,
Mr. Carter has been an independent oil and natural gas consultant and investment
advisor. Mr. Carter is a director of Brigham Exploration Company and Abraxas
Petroleum Corp., public oil and gas companies, a director of Longview Energy
Company, a privately held oil and gas company, and former president of Sabine
Corporation, an independent oil and gas exploration company.
Enoch L. Dawkins, age 67, has been a director since January 2004. Mr.
Dawkins has recently retired from Murphy Exploration and Production Co., where
he served as president from 1991 until 2003. From 1964 until 1991, Mr. Dawkins
held various operational, marketing and managerial positions at Ocean Drilling
and Exploration Company, including president from 1989 until its acquisition by
Murphy Oil Corporation in 1991. He is also a director of Superior Energy
Services, Inc.
Dr. Norman D. Francis, age 74, is standing for election for the first time
at the 2005 Annual Meeting of Stockholders. Dr. Francis has served as the
President of Xavier University of Louisiana since 1968. Dr. Francis is the
chairman of the board for the Southern Education Foundation and for Liberty Bank
and Trust, a member of the board of directors of the American Council on
Education and a Fellow of The American Academy of Arts and Sciences (inducted
1993).
Robert D. Gershen, age 51, has been a director since May 1998. Mr. Gershen
is president of Associated Energy Managers, LLC, an investment management firm
specializing in private equity investments in the energy sector. He is also a
managing director of the general partner of Energy Income Fund, an investment
fund. In addition, Mr. Gershen serves as the President of Longview Energy
Company, a privately held oil and gas company. Since 1989, Mr. Gershen has
managed, through Associated Energy Managers, LLC, three funds that invest in
energy companies in the United States.
William R. Herrin, age 70, is standing for election for the first time at
the 2005 Annual Meeting of Stockholders. Mr. Herrin served in a number of
capacities for Chevron Corporation, most recently as Vice President and General
Manager, Gulf of Mexico Production Business Unit, Chevron U.S.A. Production Co.
from July 1992 until his retirement in 1998.
William O. Hiltz, age 53, has been a director since November 2000. Mr.
Hiltz is a senior managing director of Evercore Partners and has been since
joining that firm in October 2000. From April 1995 until October 2000, Mr. Hiltz
was a managing director and head of the global energy group for UBS Warburg LLC
and its predecessor firms, SBC Warburg Dillon Read and Dillon, Read & Co. Inc.
John G. Phillips, age 82, has been a director since May 1998. Since 1995,
Mr. Phillips has been an independent financial consultant. Mr. Phillips is
former chairman, president and chief executive officer of LL&E and, since 1972,
continues to serve as a director of the Whitney National Bank and Whitney
Holding Corporation. Mr. Phillips retired from LL&E in 1985.
ITEM 2 -- APPROVAL OF AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN FOR
NON-EMPLOYEE DIRECTORS
The Board of Directors recommends a vote FOR the proposal to approve the
Amended and Restated 2000 Stock Incentive Plan for Non-Employee Directors of the
Company (the "Plan").
GENERAL
The 2000 Stock Incentive Plan for Non-Employee Directors was approved by
the Board of Directors and our stockholders in September 2000. In March 2005,
our Board of Directors amended and restated the Plan, subject to stockholder
approval, to permit the use of restricted share units in addition to stock
options, to provide flexibility to adjust grants to maintain a competitive
equity component for non-employee directors and to increase the number of shares
authorized for issuance under the Plan by 250,000. As of the Record Date,
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there were 98,000 shares available for issuance under the Plan. If the
stockholders approve the amended and restated Plan at the Meeting, the Plan will
become effective as of the date of the Meeting.
Based on advice of an independent compensation consultant retained by the
Compensation Committee, the Committee recommended, and the Board of Directors
approved, a peer group median target of approximately $150,000 in total
compensation for non-employee directors. Subject to approval of the Plan by our
stockholders, the Board of Directors has approved the grant of 5,000 stock
options and 2,000 restricted share units to each non-employee director on the
date of the 2005 Annual Meeting. See "Corporate Governance -- Compensation of
Directors" for a description of the cash component of compensation for our
non-employee directors.
The following summary of the Plan is qualified in its entirety by express
reference to the Plan, which is attached as Annex B to this Proxy Statement.
DESCRIPTION OF STOCK INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS
Shares Reserved for Issuance Under the Plan. The Company has reserved a
total of 500,000 shares of the Company's Common Stock for issuance under the
Plan. If any awards under the Plan are forfeited, cancelled, terminated,
exchanged or surrendered, settled in cash, or otherwise terminated without a
distribution of the Company's Common Stock, the shares covered by such award
shall again be available for awards under the Plan.
Types of Awards. The Plan authorizes the Plan Administrator (as defined
below) to grant stock options and restricted share units.
Eligibility. Grants and awards under the Plan may be made to non-employee
directors. For purposes of the Plan, a non-employee director is a director of
the Company who is not an employee of the Company or any subsidiary of the
Company. The Company currently has eight non-employee directors.
Administration. The Compensation Committee of the Board of Directors, or
such other committee of the Board of Directors as may be designated by the Board
of Directors (any such committee, the "Plan Administrator"), interprets and
administers the Plan. The Plan Administrator determines in its discretion
whether to grant to an eligible director stock options, restricted share units,
or both or neither, and the number of stock options and/or restricted share
units to be granted. Any decision of the Plan Administrator in the
administration of the Plan is final and binding upon all eligible directors.
Amendment and Termination of the Plan. The Board of Directors may amend,
terminate or suspend the Plan at any time, in its sole and absolute discretion;
provided, however, no amendment of the Plan may impair any right of any
non-employee director with respect to any option or restricted share unit
already granted without such director's written consent.
Capital Adjustments. In the event of a recapitalization, stock split,
stock dividend, exchange of shares, merger, reorganization, change in corporate
structure or shares of the Company or similar event, the Board of Directors may
make appropriate adjustments in the aggregate number and kind of shares reserved
for awards and in the number and kind of shares covered by outstanding awards
and in the option price per share.
STOCK OPTIONS
Option Agreement. Each option granted under the plan shall be evidenced by
an option agreement duly executed on behalf of the Company.
Option Exercise Price. The option exercise price for an option granted
under the Plan shall be the fair market value of the shares covered by the
option at the time the option is granted.
Time and Manner of Exercise of Options. Options become fully exercisable
on the first anniversary of the date of the grant. Prior to the one-year
anniversary, the options shall be exercisable as to a number of shares covered
by the option determined by pro-rating the number of shares covered by the
option based on the number of days elapsed since the date of the grant. Any
portion of an option that has not become
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exercisable prior to the cessation of the optionee's service as a director for
any reason shall not thereafter become exercisable. Vested stock options may be
exercised from time to time over the term of the option. An option may be
exercised by written notice accompanied by payment of the full option price in
cash or by check, in shares of the Company's Common Stock already owned for at
least 6 months or by delivery of a properly executed exercise notice with
irrevocable instructions to a broker to deliver to the Company the amount of
sale or loan proceeds to pay option price.
Expiration of Options. Each option shall expire on the earlier of (i) ten
(10) years from the date of the granting thereof, or (ii) thirty-six (36) months
after the date the optionee ceases to be a director of the Company for any
reason.
Transferability. During an optionee's lifetime, an option may be exercised
only by the optionee. In the event of the death of an optionee prior to the
expiration of an option, such option shall be exercisable after the date of the
optionee's death for the balance of the period up to its expiration by the
optionee's beneficiary or, if none, by the person to whom the option passes by
will or the laws of descent and distribution. Options granted under the Plan and
the rights and privileges conferred thereby shall not be subject to execution,
attachment or similar process and may not be transferred, assigned, pledged or
hypothecated in any manner other than by will or by the applicable laws of
descent and distribution.
RESTRICTED SHARE UNITS
Nature of Restricted Share Units. Each restricted share unit represents
the right to receive one share of Common Stock upon the earlier to occur of: (i)
the cessation of the eligible director's service as a director of the Company
for any reason, or (ii) the occurrence of a change of control of the Company
(each, a "Payment Event"). Each restricted share unit shall be evidenced by a
restricted share unit agreement duly executed on behalf of the Company.
Vesting and Forfeiture. An eligible director shall become 100% vested in a
grant of restricted share units on the first anniversary of the date of grant.
Prior to the first anniversary of the grant, an eligible director shall be
vested in a number of restricted share units determined by pro-rating the grant
based on the number of days elapsed since the date of the grant. If the service
of an eligible director ceases for any reason prior to the first anniversary of
the grant, the director shall forfeit any unvested restricted share units.
Dividend Equivalents. If the Company declares a dividend on its Common
Stock, eligible directors shall be entitled to receive a grant of an additional
number of restricted share units representing shares of Common Stock having a
fair market value on the dividend payment date which shall be equal to the value
of the cash dividend such director would have been entitled to had the director
held shares of common stock instead of restricted share units.
Payment of Vested Restricted Share Units. Upon the occurrence of a Payment
Event, the director shall be entitled to receive a number of shares of Common
Stock equal to the number of vested restricted share units held by such director
at the time of the event.
Transferability. Restricted share units granted under the Plan shall not
be subject to execution, attachment or similar process and may not be
transferred, assigned, pledged or hypothecated in any manner other than by will
or applicable laws of descent and distribution or by beneficiary designation
taking effect upon the director's death.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax consequences
generally arising with respect to awards that may be granted under the Plan.
This discussion is intended for the information of stockholders considering how
to vote at the Annual Meeting and not as tax guidance to individuals who
participate in the Plan.
Stock Options. The options under the Plan are nonstatutory options not
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code. The grant of options will not result in taxable
8
income to the non-employee director or a tax deduction to the Company. The
exercise of an option by a non-employee director will result in taxable ordinary
income to the non-employee director and generally a corresponding deduction for
the Company, in each case equal to the difference between the fair market value
of the shares being purchased on the date the option was exercised and their
fair market value on the date the option was granted (the option price).
Restricted Share Units. The grant of restricted stock under the Plan will
not result in taxable income to the non-employee director or a tax deduction to
the Company. Upon the payment of shares following a Payment Event, the
non-employee director will recognize ordinary income equal to the fair market
value of such shares at the time of receipt. The Company will generally be
entitled to a deduction that corresponds to the amount and time of the
non-employee director's recognition of income.
NEW PLAN BENEFITS
No benefits or amounts will be received by or allocated to any current
executive officer or any employee (including any current officer who is not an
executive officer) under the Plan because no such person is eligible to
participate in the Plan. Other than as set forth above under "General," the
benefits or amounts that will be received by, or allocated to, all current
directors who are not executive officers under the Plan are not determinable
because such benefits or amounts, if any, will be awarded in the future at the
discretion of the Plan Administrator.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information as of December 31, 2004, with
respect to compensation plans under which our equity securities are authorized
for issuance.
NUMBER OF SECURITIES WEIGHTED
TO BE ISSUED UPON AVERAGE EXERCISE NUMBER OF SECURITIES
EXERCISE OF OUTSTANDING PRICE OF REMAINING AVAILABLE FOR
OPTIONS, WARRANTS OUTSTANDING FUTURE GRANT UNDER EQUITY
AND RIGHTS(1) OPTIONS(2) COMPENSATION PLANS
----------------------- ---------------- -------------------------
Equity compensation plans
approved by stockholders... 1,707,494 $10.78 1,508,851
Equity compensation plans not
approved by stockholders... -- -- --
---------------
(1) Comprised of 1,247,964 shares subject to issuance upon the exercise of
options, 211,000 shares issued as performance shares and 248,530 shares to
be issued upon the lapsing of restrictions associated with restricted share
units
(2) Restricted share units and performance shares do not have an exercise price;
therefore this only reflects the option exercise price.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE PLAN
ITEM 3 -- RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
The Audit Committee of the Board of Directors is required by law and
applicable New York Stock Exchange rules to be directly responsible for the
appointment, compensation and retention of the Company's independent registered
public accountants. The Audit Committee has appointed KPMG LLP as the
independent registered public accountants for the year ending December 31, 2005.
While stockholder ratification is not required by the Company's By-laws or
otherwise, the Board of Directors is submitting the selection of KPMG LLP to the
stockholders for ratification as part of good corporate governance practices. If
the stockholders fail to ratify the selection, the Audit Committee may, but is
not required to, reconsider whether to retain KPMG LLP. Even if the selection is
ratified, the Audit Committee in its discretion may direct the appointment of
different independent registered public accountants at any time during the year
if it determines that such a change would be in the best interest of the Company
and its stockholders.
9
The Board of Directors recommends a vote FOR the proposal to ratify the
selection of KPMG LLP as the Company's independent registered public accountants
to audit the Company's consolidated financial statements for the year ending
December 31, 2005. The persons designated as proxies will vote FOR the
ratification of KPMG LLP as the Company's independent registered public
accountants, unless otherwise directed. Representatives of KPMG LLP are expected
to be present at the 2005 Annual Meeting, with the opportunity to make a
statement should they choose to do so, and to be available to respond to
questions, as appropriate.
CORPORATE GOVERNANCE
THE BOARD OF DIRECTORS
The directors hold regular meetings, attend special meetings as required
and spend such time on the affairs of the Company as their duties require. The
Company's Corporate Governance Guidelines provide that directors are expected to
attend regular Board meetings and the Annual Meeting of Stockholders in person
and to spend the time needed and meet as frequently as necessary to properly
discharge their responsibilities. During calendar year 2004, the Board of
Directors held a total of nine (9) meetings, regular and special. All directors
of the Company attended at least seventy-five percent (75%) of the meetings of
the Board of Directors and of the committees on which they served during the
period. All but one of the Company's current directors attended the annual
meeting of stockholders in 2004.
The non-management directors meet in executive sessions at least
semi-annually to discuss such matters as they deem appropriate and, at least
once a year, to review the Compensation Committee's annual review of the chief
executive officer. These executive sessions are chaired by the Chairman of the
Nominating & Governance Committee. Stockholders may communicate with the
non-management directors by following the procedures under "-- Communications
with Board of Directors."
COMMITTEES OF THE BOARD
THE AUDIT COMMITTEE
The Board of Directors has a standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, the
current members of which are Messrs. Bumgarner, Carlisle (Chairman), Carter and
Phillips. The Board of Directors has determined that each of the members of the
Audit Committee is "independent" as defined by New York Stock Exchange ("NYSE")
listing standards and the rules of the SEC applicable to audit committee
members, and that Mr. Carlisle qualifies as an "audit committee financial
expert" as described in Item 401(h) of Regulation S-K. The Audit Committee has a
charter under which its primary purpose is to assist the Board in overseeing (1)
the integrity of the Company's financial statements, (2) the independent
registered public accountants' qualifications and independence, (3) the
performance of the Company's internal audit function and independent registered
public accountants and (4) the compliance by the Company with legal and
regulatory requirements. The Audit Committee is directly responsible for the
appointment and compensation of the independent registered public accountants.
During fiscal year 2004, the Audit Committee held six (6) meetings.
THE COMPENSATION COMMITTEE
The Board of Directors has a standing Compensation Committee, the current
members of which are Messrs. Bumgarner (Chairman), Dawkins and Phillips. The
Compensation Committee has a charter under which its responsibilities and
authorities include reviewing the Company's compensation strategy, reviewing the
performance of and approving the compensation for the senior management (other
than the chief executive officer), evaluating the chief executive officer's
performance and, either as a committee or together with the other independent
directors, determining and approving the chief executive officer's compensation
level. In addition, the committee approves and administers employee benefit
plans and takes such other action as may be appropriate or as directed by the
Board of Directors to ensure that the compensation policies of the
10
Company are reasonable and fair. The Board of Directors has determined that each
member of the Compensation Committee is "independent" as defined by NYSE listing
standards, other than Mr. Dawkins. Under the transition provisions of the New
York Stock Exchange rules, we have until our annual meeting in 2006 to replace
Mr. Dawkins as a member of the Compensation Committee. During fiscal year 2004,
the Compensation Committee held six (6) meetings.
THE NOMINATING & GOVERNANCE COMMITTEE
The Board of Directors also has a standing Nominating & Governance
Committee, the current members of which are Dr. Kelly (Chairman) and Messrs.
Carter and Gershen. The Nominating & Governance Committee has a charter under
which its responsibilities and authorities include identifying director
candidates and recommending director nominees for the next annual meeting of
stockholders or for any vacancy on the Board of Directors and recommending
members of the Board of Directors to serve on the various committees. In
addition, the Nominating & Governance Committee develops and recommends to the
Board of Directors the Corporate Governance Guidelines of the Company and is
responsible for the oversight of the evaluation of the Board of Directors and
management. The Board of Directors has determined that each member of the
Nominating & Governance Committee is "independent" as defined by NYSE listing
standards. During fiscal year 2004, the Nominating & Governance Committee held
six (6) meetings.
NOMINEE QUALIFICATIONS
When seeking candidates for director, the Nominating & Governance Committee
may solicit suggestions from incumbent directors, management, stockholders or
others. While the Nominating & Governance Committee has authority under its
charter to retain a search firm for this purpose, no such firm was utilized in
2004. After conducting an initial evaluation of a potential candidate, the
Nominating & Governance Committee will interview that candidate if it believes
such candidate might be suitable to be a director. The Nominating & Governance
Committee may also ask the candidate to meet with management. If the Nominating
& Governance Committee believes a candidate would be a valuable addition to the
Board, it will recommend to the full Board that candidate's election.
The Nominating & Governance Committee selects each nominee based on the
nominee's skills, achievements and experience. The Nominating & Governance
Committee considers a variety of factors in selecting candidates, including, but
not limited to the following: independence, wisdom, integrity, an understanding
and general acceptance of the Company's corporate philosophy, valid business or
professional knowledge and experience, a proven record of accomplishment with
excellent organizations, an inquiring mind, a willingness to speak one's mind,
an ability to challenge and stimulate management and a willingness to commit
time and energy.
This year, Dr. Francis and Mr. Herrin are standing for election by the
stockholders for the first time. Dr. Francis and Mr. Herrin were initially
recommended to the Board by our Chief Executive Officer who believed they would
make valuable additions to the Board.
COMMUNICATIONS WITH BOARD OF DIRECTORS
The Nominating & Governance Committee, on behalf of the Board, reviews
letters from stockholders concerning the Company's annual general meeting and
governance process and makes recommendations to the Board based on such
communications. Stockholders can send communications to the Board by mail in
care of the Corporate Secretary at 201 St. Charles Avenue, Suite 3400, New
Orleans, Louisiana 70170, and should specify the intended recipient or
recipients. All such communications, other than unsolicited commercial
solicitations or communications, will be forwarded to the appropriate director
or directors for review. Any such unsolicited commercial solicitation or
communication not forwarded to the appropriate director or directors will be
available to any non-management director who wishes to review it.
11
WEBSITE ACCESS TO CORPORATE GOVERNANCE DOCUMENTS
Copies of the charters for the Audit Committee, the Compensation Committee
and the Nominating & Governance Committee, as well as the Company's Corporate
Governance Guidelines and Code of Business Conduct and Ethics (the "Code"), are
available free of charge on the Company's website at www.eplweb.com or by
writing to Investor Relations, Energy Partners, Ltd., 201 St. Charles Avenue,
Suite 3400, New Orleans, Louisiana 70170. The Company will also post on its
website any amendment to the Code and any waiver of the Code granted to any of
its directors or executive officers.
COMPENSATION OF DIRECTORS
Non-employee directors receive an annual retainer of $27,500 and meeting
fees of $1,000 for each Board or committee meeting attended (even if held on the
same date). The Chairman of the Audit Committee receives an additional $15,000
per year, each other Audit Committee member receives an additional $5,000 per
year and the Chairman of each of the Compensation Committee and the Nominating &
Governance Committee receives an additional $10,000 per year. Meeting fees are
paid in cash. Retainer fees are paid in shares of Common Stock (valued at fair
market value); provided that a director may elect to receive up to 50% of such
retainer fees in cash. Directors may defer all or a portion of their retainer
and meeting fees. Directors are also reimbursed for their reasonable expenses in
connection with attending Board of Director meetings and other Company events.
Our 2000 Stock Option Plan for Non-Employee Directors provides for
automatic grants of stock options to members of the Board of Directors who are
not employees of the Company or any subsidiary. An initial grant of a stock
option to purchase 2,000 shares of our Common Stock will be made to each person
who becomes a non-employee director after the effective date upon his or her
initial election or appointment. After the initial grant, each non-employee
director will receive an additional grant of a stock option to purchase 4,000
shares of our Common Stock immediately following each annual meeting. All stock
options granted under the plan will have a per share exercise price equal to the
fair market value of a share of Common Stock on the date of grant (as determined
by the committee appointed to administer the plan), will be fully vested and
immediately exercisable and will expire on the earlier of (i) ten years from the
date of grant or (ii) 36 months after the optionee ceases to be a director for
any reason. The total number of shares of our Common Stock that may be issued
under the plan is 250,000, subject to adjustment in the case of certain
corporate transactions and events. We are proposing to amend this plan to permit
the use of restricted share units in addition to stock options, to provide
flexibility to adjust grants to maintain a competitive equity component for
non-employee directors and to increase the number of shares authorized for
issuance under the Plan by 250,000. Please see "Item 2 -- Approval of Amended
and Restated 2000 Stock Incentive Plan for Non-Employee Directors" and Annex B
for more information.
12
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION
The following table sets forth certain summary information for the prior
three years concerning the compensation earned by the Company's Chief Executive
Officer (Mr. Bachmann) and our five other most highly compensated executive
officers who earned in excess of $100,000 for services rendered in 2004.
LONG TERM
COMPENSATION
AWARDS(1)
-----------------------
SECURITIES
RESTRICTED UNDERLYING
SHARE OPTIONS/ ALL OTHER
SALARY BONUS AWARD(S) SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)(2)
--------------------------- ---- ------- ------- ---------- ---------- ------------
Richard A. Bachmann............... 2004 392,000 600,000 -- 62,000 6,853
Chairman, President and Chief 2003 372,000 500,000 -- 200,000 9,096
Executive Officer(3) 2002 350,000 270,000 90,630 53,334 6,189
Suzanne V. Baer................... 2004 245,000 250,000 -- -- 6,367
Executive Vice President and 2003 232,500 200,000 -- 147,000 2,138
Chief Financial Officer(4)(5) 2002 218,750 175,000 44,268 26,667 1,924
Phillip A. Gobe................... 2004 21,538 100,000 758,800 95,500 127
Executive Vice President and
Chief Operating Officer(6)(7)
John H. Peper..................... 2004 212,000 200,000 -- 13,400 35,836
Executive Vice President, 2003 201,500 175,000 -- 33,500 4,495
General Counsel and Corporate 2002 189,750 128,588 188,822 23,333 591
Secretary(8)
T. Rodney Dykes................... 2004 202,000 80,000 -- 10,000 4,675
Senior Vice President -- 2003 184,583 160,000 -- 26,000 12,244
Production(9)
William Flores, Jr. .............. 2004 202,000 25,000 -- 7,000 46,096
Senior Vice President -- 2003 81,250 160,000 214,400 26,000 255
Drilling(6)(10)
---------------
(1) Under the Amended and Restated 2000 Long Term Stock Incentive Plan, all
outstanding awards will become fully exercisable at the time of a change of
control of the Company. See "-- Employment Agreements and Change of Control
Arrangements" for a summary of the definition of change of control.
(2) The amounts represent the dollar value of term life insurance premiums paid
by us for the benefit of the executive officers, the dollar value of the
Company match to the Energy Partners, Ltd. 401(k) Plan on the employees'
behalf, reimbursement of relocation expenses and the Company's
contributions to a key employee retention plan. The plan requires that the
401(k) match be held in our Common Stock for a period of three years. For
2004, (i) the life insurance premiums for Messrs. Bachmann, Gobe, Peper,
Dykes and Flores and for Ms. Baer were $4,752, $127, $1,031, $635, $636 and
$2,367, respectively; (ii) the value of the 401(k) match for Messrs.
Bachmann, Peper and Dykes and for Ms. Baer were $2,101, $6,286, $4,040 and
$4,100, respectively; and (iii) the value of reimbursed relocation expenses
for Messrs. Peper and Flores was $27,979 and $45,460, respectively.
(3) On May 6, 2003, Mr. Bachmann was awarded 9,000 restricted shares for
services rendered in 2002, half of which vested on May 6, 2004 and the
remainder of which vest on May 6, 2005. As of December 31, 2004, the
unvested portion of Mr. Bachmann's restricted shares had a value of
$1,312,280. Dividends, if any, will be paid on the restricted shares at the
same rate paid to all stockholders.
(4) On March 18, 2003, Ms. Baer was granted 4,545 restricted shares for
services rendered in 2002, one half of which vested on March 18, 2004 and
the remainder of which vested on March 18, 2005. As of December 31, 2004,
the unvested portion of Ms. Baer's restricted shares had a value of
$46,074. Dividends, if any, will be paid on the restricted shares at the
same rate paid to all stockholders.
13
(5) Ms. Baer has announced her plan to retire in April 2005. Her successor,
David R. Looney, began service in February 2005 and became the Company's
Executive Vice President and Chief Financial Officer upon his appointment
by the Board of Directors in March 2005.
(6) Mr. Gobe commenced employment with us in December 2004 and Mr. Flores
commenced employment with us in August 2003.
(7) On December 6, 2004, Mr. Gobe was granted 40,000 restricted share units
which vest on December 6, 2007. As of December 31, 2004, the unvested
portion of Mr. Gobe's restricted shares had a value of $810,800. Dividends,
if any, will be paid on the restricted shares at the same rate paid to all
stockholders.
(8) On March 18, 2003, Mr. Peper was granted 3,878 restricted shares for
services rendered in 2002. One half of the shares vested on March 18, 2004
and the remainder vested on March 18, 2005. On May 6, 2003, Mr. Peper was
granted 15,000 restricted shares for services rendered in 2002, all of
which vest on May 6, 2006. As of December 31, 2004, the unvested portion of
Mr. Peper's restricted shares had a value of $343,354. Dividends, if any,
will be paid on the restricted shares at the same rate paid to all
stockholders.
(9) Mr. Dykes was named Senior Vice President -- Production in 2003. As of
December 31, 2004, the unvested portion of Mr. Dykes' restricted shares had
a value of $35,310. Dividends, if any, will be paid on the restricted
shares at the same rate paid to all stockholders.
(10) On August 1, 2003, Mr. Flores was granted 20,000 restricted shares, one
third of which vested on August 1, 2004, one third of which vest on August
1, 2005 and the remaining one third of which vest on August 1, 2006. As of
December 31, 2004, the unvested portion of Mr. Flores' restricted shares
had a value of $270,260. Dividends, if any, will be paid on the restricted
shares at the same rate paid to all stockholders.
INCENTIVE AND OTHER EMPLOYEE BENEFIT PLANS
The table below sets forth information regarding stock options granted to
our Chief Executive Officer and our five other most highly compensated executive
officers for services rendered during the fiscal year ended December 31, 2004
and includes stock options granted in March 2005. We did not grant any stock
appreciation rights for services rendered during 2004.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERMS(1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
---- ------------ ------------ ----------- ---------------- ---------- ----------
Richard A. Bachmann(2)..... 62,000 33% 25.07 March 24, 2015 1,206,767 2,477,218
Suzanne V. Baer............ -- -- -- -- -- --
Phillip A. Gobe(2)(3)...... 50,000 27% 18.97 December 6, 2014 596,507 1,511,665
45,500 24% 27.34 March 17, 2015 782,326 1,982,568
John H. Peper(2)........... 13,400 7% 27.34 March 17, 2015 230,399 583,877
T. Rodney Dykes(2)......... 10,000 5% 27.34 March 17, 2015 171,940 435,729
William Flores, Jr.(2)..... 7,000 4% 27.34 March 17, 2015 120,358 305,010
---------------
(1) The dollar amounts under these columns represent the potential realizable
value of the total grant of non-qualified stock options to each of the named
executive officers assuming that the market price of the underlying security
appreciates in value from the date of grant at the 5% and 10% annual rates
prescribed by the SEC. These calculations are not intended to forecast
possible future appreciation, if any, of the price of the Company's Common
Stock.
14
(2) Options granted in March 2005 are exercisable one third on March 17, 2006
(March 24, 2006 for Mr. Bachmann), one third beginning on March 17, 2007
(March 24, 2007 for Mr. Bachmann) and the remainder beginning on March 17,
2008 (March 24, 2008 for Mr. Bachmann).
(3) Mr. Gobe received 50,000 options upon commencement of his employment in
December 2004. One third of these options are exercisable on December 6,
2005, one third are exercisable beginning on December 6, 2006 and the
remainder are exercisable beginning on December 6, 2007.
The table below sets forth information concerning the value of exercised
stock options and unexercised stock options held by our Chief Executive Officer
and our five other most highly compensated executive officers as of December 31,
2004. Stock options granted in March 2005, all of which are unexercisable, are
not included in the table.
AGGREGATED OPTION EXERCISES DURING FISCAL 2004
AND OPTION VALUES AS OF DECEMBER 31, 2004
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
NUMBER OF VALUE FISCAL YEAR END(#) FISCAL YEAR END($)(2)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
Richard A. Bachmann......... -- -- 197,778 155,556 1,524,536 1,304,471
Suzanne V. Baer............. -- -- 350,889 162,778 3,686,248 1,346,986
Phillip A. Gobe............. -- -- -- 50,000 -- 65,000
John H. Peper............... -- -- 64,278 67,555 737,321 646,541
T. Rodney Dykes............. 20,000 112,438 24,445 44,888 197,739 387,498
William Flores, Jr. ........ -- -- -- 26,000 -- 173,940
---------------
(1) Fair market value on date of exercise minus the exercise price of the stock
options.
(2) Based on the positive difference, if any, between the closing sale price of
the Company's Common Stock of $20.27 on December 31, 2004, as reported by
the New York Stock Exchange, and the exercise price of such options.
LONG-TERM INCENTIVE PLAN -- AWARDS IN FISCAL 2004
The table below sets forth information concerning the grant of performance
shares to our Chief Executive Officer and our five other most highly compensated
executive officers in March 2005 for services rendered in 2004.
NUMBER OF
PERFORMANCE PERFORMANCE ESTIMATED FUTURE PAYOUT(1)
SHARES PERIOD UNTIL ----------------------------
NAME GRANTED(1) PAYOUT THRESHOLD TARGET MAXIMUM
---- ----------- ------------ --------- ------ -------
Richard A. Bachmann...................... 29,400 3 years -- 29,400 58,800
Suzanne V. Baer.......................... -- -- -- -- --
Phillip A. Gobe.......................... 21,600 3 Years -- 21,600 43,200
John H. Peper............................ 6,350 3 Years -- 6,350 12,700
T. Rodney Dykes.......................... 4,745 3 Years -- 4,745 9,490
William Flores, Jr. ..................... 3,322 3 Years -- 3,322 6,644
---------------
(1) Each performance share entitles the holder to receive, at the end of the
performance period and upon the satisfaction of conditions set forth in the
Amended and Restated 2000 Long Term Stock Incentive Plan, shares of the
Company's Common Stock. The payout can vary depending on the Company's
achievement of proved reserve growth, production growth and full cycle
return on investment, all computed after a 3-year cycle, compared with the
results during the same period of a peer group of public companies of
15
relatively similar size and geographic scope as the Company selected by the
Compensation Committee. Payout is equal to the number of performance shares
granted times a performance modifier based on the absolute ranking of the
Company's performance relative to the peer group.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Under our offer letter agreement with Mr. Gobe dated October 19, 2004, he
is entitled to an annual salary of at least $300,000. In addition, Mr. Gobe
received 40,000 restricted share units which vest on the third anniversary of
the date of the grant, and ten year options to purchase 50,000 shares of Common
Stock, which vest ratably over three years, at an exercise price equal to the
market price of the Common Stock on the date of grant. Mr. Gobe's bonus target
is 65% of base salary.
Under our offer letter agreement with Mr. Looney dated February 9, 2005, he
is entitled to an annual salary of at least $245,000. In addition, Mr. Looney
received an employment payment of $235,000, 30,000 restricted share units which
vest on the third anniversary of the date of the grant, and ten year options to
purchase 30,000 shares of Common Stock, which vest ratably over three years, at
an exercise price equal to the market price of the Common Stock on the date of
grant. Mr. Looney's bonus target is 55% of base salary.
Certain of our executive officers, including Messrs. Bachmann, Gobe, Looney
and Peper, have entered into a Change of Control Severance Agreement ("Severance
Agreement") with the Company. Each Severance Agreement has a three year term,
and terminates March 28, 2008. In addition, the Company has a Change of Control
Severance Plan (the "Severance Plan" and, together with the Severance
Agreements, the "Severance Program") for certain key employees, including
Messrs. Dykes and Flores. The Severance Plan may be amended or terminated by the
Board of Directors in its sole discretion prior to the occurrence of a change of
control of the Company.
The Severance Program provides that, upon the occurrence of a change of
control, all equity awards granted to participants will become fully vested, all
stock options will become fully exercisable and all restrictions on restricted
shares and restricted share units will lapse. With respect to performance shares
or other awards contingent on satisfaction of performance measures, the
performance cycle will end as of the date of the change of control. In addition,
participants in the Severance Program are entitled to receive certain benefits
in the event of certain terminations of employment for "good reason" (including
terminations by the participant following certain changes in duties, benefits,
etc. that are treated as involuntary terminations) occurring within two years
after a change of control. An eligible participant would be entitled to receive
between one and three times the sum of (i) the participant's annual rate of base
salary for the year of termination and (ii) the participant's average annual
bonus from the Company for the three calendar years preceding the calendar year
in which such termination of employment occurs (or, if the participant was
employed for less than three years, the greater of the average annual bonus for
all of the calendar years such individual was employed and the target bonus for
the calendar year of termination). Messrs. Bachmann, Gobe, Looney and Peper are
entitled to receive three times, and Messrs. Dykes and Flores are entitled to
receive two times, the sum described in the preceding sentence. Payments are to
be paid in a lump sum in cash within 30 days following termination. In addition,
participants will continue to receive medical and life insurance benefits in
existence at the time of the change of control for a specified period of time
(18 months for our executive officers); provided that the participant continues
to pay the same portion of the required premium for such coverage as was
required prior to termination. If any payments are subject to the excise tax on
"excess parachute payments" under Section 280G of the Internal Revenue Code of
1986, payments to the participant will be reduced until no amount payable to the
participant would constitute an "excise parachute payment," provided that no
such reduction will be made if the net after-tax payment to which the
participant would otherwise be entitled without such reduction would be greater
than the net after-tax payment, in each case, after taking into account Federal,
state, local or other income and excise taxes, to the participant resulting from
the receipt of such payments with such reduction.
For purposes of the Severance Program and awards under the Amended and
Restated 2000 Long Term Stock Incentive Plan and the 2000 Stock Incentive Plan
for Non-Employee Directors, a change of control generally includes any of the
following events: (i) an acquisition by any person of 25% or more of the
securities
16
entitled to vote in the election of directors, (ii) the current directors, or
their approved successors, no longer constitute a majority of the Board of
Directors, (iii) a merger or similar transaction is consummated which results in
the holders of our Common Stock owning 50% or less of the surviving or
transferee entity's securities entitled to vote generally in the election of
directors or (iv) approval of a plan of liquidation or disposition of all or
substantially all of our assets.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The following report is submitted by the Compensation Committee for
inclusion in this proxy pursuant to the rules of the Securities and Exchange
Commission with respect to executive compensation:
The Compensation Committee (the "Committee") reviews the general
compensation policies of the Company, approves the compensation to be paid to
executive officers, other than the Company's Chief Executive Officer which is
approved by the independent members of the Board of Directors based upon the
Committee's recommendation, and administers the Company's incentive compensation
plans. All equity awards are made under the Company's Amended and Restated 2000
Long Term Stock Incentive Plan. The Committee is composed of three (3)
non-employee directors: Messrs. Bumgarner, Dawkins and Phillips.
PHILOSOPHY OF COMPENSATION
The objectives of the Company's compensation program are (i) to attract and
retain the best available talent, (ii) to motivate employees to achieve the
Company's goals, (iii) to link employee and stockholder interests through
performance rewards and (iv) to provide compensation that can recognize
individual contributions to corporate objectives. The Committee's compensation
philosophy is designed so that a substantial component of each employee's
potential annual compensation is dependent upon measurable improvement to
stockholder value.
The Committee based its decisions with respect to performance-measured
compensation of our executive officers for services rendered in 2004 based upon
these principles and our assessment of each officer's potential to enhance long
term stockholder value. The Committee also considered each executive officer's
current salary and prior year compensation, as well as compensation paid to the
executive officer's peers. The Committee engages an outside compensation
consultant to assist it in determining appropriate types and levels of
compensation. The Committee expects recommendations from the Company's Chief
Executive Officer but exercises its own judgment and makes its own
determination.
TYPES OF COMPENSATION
The Company provides two main types of compensation to executive officers:
(1) annual compensation, consisting of a market-median base salary and
an incentive bonus based in part on the performance of the Company's Common
Stock as well as the attainment of corporate and individual objectives; and
(2) long-term compensation, consisting of stock options, the value of
which is directly linked to the value of a share of the Company's Common
Stock, and performance shares, which are paid out based upon corporate
performance against established measures.
ANNUAL COMPENSATION
At least once each year, the Committee reviews the Company's executive
compensation program. The annual base salary of each executive is determined by
an analysis of the compensation paid to other executive officers in similar
positions in the Company's peer group. Market data is derived from a combination
of sources, including published peer group data. A competitive base salary is
consistent with the Company's long-term objectives of attracting and retaining
highly qualified, competent executives.
The incentive bonus is particularly aligned with the interests of the
Company's stockholders. Incentive bonuses are based on quantitative and
qualitative factors that the Committee may deem appropriate and the Committee's
assessment of the individual's performance. While the Committee does not apply a
completely formulaic approach, in 2004 the quantitative factors considered
consisted of predetermined targets of
17
production growth, reserve replacement, reserve replacement cost, lease
operating expense per barrel of oil equivalent ("Loe/Boe") and return on capital
employed, as well as the increase in value of the Company's Common Stock. The
Committee also compares the Company's results against the results of its peer
group. A target bonus percentage of base salary is predetermined and
periodically reviewed for each executive on the basis of market practices,
although these targets can be significantly affected by the Committee's
assessment of individual performance. The Committee targets the 75th percentile
for the combination of base salary and incentive bonus when results warrant. In
reviewing quantitative factors, the Committee will determine each year whether a
threshold level of performance below the Company's objectives is deserving of
any bonus percentage, taking into account external factors beyond the control of
the executives. For 2004, the Committee determined that the Company exceeded the
reserve replacement and return on capital employed targets, met its target for
reserve replacement costs in light of an increased cost environment and met its
targets for production growth and Loe/Boe on a storm-adjusted basis. Overall,
the Committee determined that the Company had exceeded its adjusted targets, and
noted that the stock price had also increased over the year. Based on these
results, and the Committee's assessment of individual performance, the Committee
approved the bonuses for executive officers set forth under "Executive
Compensation and Other Matters -- Summary Compensation." The Committee approved
revised quantitative targets for 2005 based on the same factors described above.
LONG-TERM COMPENSATION
The Company's Amended and Restated 2000 Long Term Stock Incentive Plan (the
"Plan") permits the Committee to select the officers and employees of the
Company who will receive awards, to determine the types of awards to be granted
to each such person and to establish the terms of each award.
The Committee considers stock options to be an important part of the
Company's long-term incentive program for executive officers as these awards
create an alignment of interests with the Company's stockholders. Stock options
have an exercise price equal to fair market value on the date of grant, and
generally have a ten year term and vest ratably over three years. If any grantee
voluntarily leaves the Company, unvested options are forfeited and vested
options must be exercised within 30 days. Unvested options will become
immediately exercisable upon a change of control (as defined) of the Company.
The Committee also uses performance shares as an integral part of the
Company's long-term incentive program. Each performance share entitles the
holder to receive, at the end of the performance period and upon the
satisfaction of conditions set forth in the Plan, shares of the Company's Common
Stock. With respect to awards made in March 2005, the payout can vary depending
on the Company's proved reserve growth, production growth and full cycle return
on investment, all computed after a 3-year cycle, compared with the results
during the same period of public companies that are of relatively similar size
and geographic scope as the Company selected by the Committee. Payout is equal
to the number of performance shares granted times a performance modifier based
on the absolute ranking of the Company's performance relative to the peer group.
In determining the appropriate levels of incentive compensation, the
Committee reviews comparable compensation, as well as historical share usage and
dilution analyses and the fair value of long-term compensation as a percentage
of market capitalization, of its peer group. The Committee targets the 75th
percentile for long-term compensation when results warrant. Because the Company
is earlier in its corporate history than most of its peer group, the Company's
long-term compensation awards have generally been higher than its peer group.
The desired dollar amount of long-term compensation is divided equally between
stock options and performance shares based on the binomial value of the stock
options and the market price of Common Stock for performance shares. For 2004,
the Committee approved awards for our executive officers as set forth under
"Executive Compensation and Other Matters -- Summary Compensation", and
"-- Long-Term Incentive Plan -- Awards in Fiscal 2004."
SEVERANCE PROGRAM
In March 2005, the Committee recommended, and the Board of Directors
approved, the Severance Program described under "Executive Compensation and
Other Matters -- Employment Agreements and Change of Control Arrangements" for
key employees, including our executive officers. In considering the
18
Severance Program, the Committee, with the advice of an outside compensation
consultant, reviewed the potential costs of the Program (including the potential
for loss of tax deductions), by individual and in the aggregate, to the Company.
The Committee also considered the nature of similar programs at other companies,
and noted that the proposed severance agreements terminate in March 2008 and the
proposed severance plan could be amended or terminated by the Board in its sole
discretion prior to the occurrence of a change of control. The Committee
determined that the protection afforded by the Severance Program was desirable
in order to attract and retain quality employees, and recommended the Program to
the Board.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Committee based its recommendations to the independent members of the
Board with respect to compensation of our Chief Executive Officer, Richard A.
Bachmann, for services rendered in 2004 on the factors discussed above and our
assessment of his potential to enhance long term stockholder value. The
Committee also considered Mr. Bachmann's current salary and prior year
compensation, as well as compensation paid to his peers. The Committee engaged
an outside compensation consultant to assist it in determining appropriate types
and levels of compensation. The independent members of the Board concurred with
the Committee's recommendations.
Mr. Bachmann's base salary of $392,000 for 2004 was commensurate with the
median base salary for chief executive officers of the Company's peer group. In
March 2005, Mr. Bachmann was granted 62,000 stock options which vest ratably
over three years and 29,400 performance shares which are paid three years from
date of grant, subject to the Company's achievement of specified goals described
above. Mr. Bachmann's bonus target is 75% and in March 2005 Mr. Bachmann was
awarded a bonus of $600,000, exceeding the target, in light of his exceptional
leadership and the Company's results during 2004.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986 limits the
deductibility for federal income taxes of compensation in excess of $1 million
paid to a publicly held company's chief executive officer and any of the other
four highest-paid executive officers, except for "performance-based"
compensation. The Committee is aware of this limitation and intends to consider
the effects of Section 162(m) on the Company when making compensation decisions.
Compensation Committee
John C. Bumgarner, Chairman
Enoch L. Dawkins, Member
John G. Phillips, Member
REPORT OF THE AUDIT COMMITTEE
The Audit Committee acts under a written charter adopted and approved by
the Board of Directors. The Board of Directors revised the Audit Committee
Charter on March 24, 2005 to reflect changes in the rules of the New York Stock
Exchange. A copy of the amended Audit Committee Charter is attached to this
Proxy Statement as Annex C.
It is not the responsibility of the Audit Committee to plan or conduct
audits, to determine that the Company's financial statements are in all material
respects complete and accurate in accordance with generally accepted accounting
principles, or to certify the Company's financial statements. This is the
responsibility of management and the independent registered public accountants.
It is also not the responsibility of the Audit Committee to guarantee the
opinion of the independent registered public accountants or assure compliance
with laws and regulations and the Company's Code of Business Ethics.
Based on the Audit Committee's review of the audited financial statements
as of and for the fiscal year ended December 31, 2004 and its discussions with
management regarding such audited financial statements and management's
assessment of the effectiveness of the Company's system of internal control over
financial
19
reporting, its receipt of written disclosures and the letter from the
independent registered public accountants required by Independence Standards
Board Standard No. 1, its discussions with the independent registered public
accountants regarding such auditor's independence, the matters required to be
discussed by the Statement on Auditing Standards 61, its discussions with the
independent registered public accountants regarding its opinion on the
effectiveness of the Company's system of internal control over financial
reporting and on management's assessment of the Company's system of internal
control over financial reporting, and other matters the Audit Committee deemed
relevant and appropriate, the Audit Committee recommended to the Board of
Directors that the audited financial statements as of and for the fiscal year
ended December 31, 2004 be included in the Company's Annual Report on Form 10-K
for such fiscal year.
FEES BILLED TO THE COMPANY BY KPMG LLP DURING FISCAL YEARS ENDED DECEMBER 31,
2004 AND 2003
Audit Fees. Audit fees (including expenses) billed (or billable) to the
Company by KPMG LLP with respect to fiscal 2004 and fiscal 2003 were $481,000
and $312,300, respectively. 2004 audit fees include (i) annual financial
statement audit -- $260,000; (ii) Sarbanes-Oxley Section 404
Certification -- $265,000; and (iii) Registration Statements -- $56,000. 2003
audit fees include (i) annual financial statement audit -- $148,000; and (ii)
Registration Statements including a Rule 144A Offering Memorandum -- $164,300.
Audit-Related Fees. Audit-related fees (including expenses) billed (or
billable) to the Company by KPMG LLP with respect to fiscal 2004 and fiscal 2003
were $15,000 and $14,000, respectively. Such fees were in connection with the
Company's benefit plan audit.
Tax Fees. Tax fees (including expenses) billed by KPMG LLP with respect to
fiscal 2004 and fiscal 2003 were $0 and $5,200, respectively. Such fees were
primarily in connection with tax consulting services.
All Other Fees. All other fees (including expenses) billed by KPMG LLP
with respect to fiscal 2004 and fiscal 2003 were $0 and $3,200, respectively.
Such fees were primarily in connection with a business risk assessment and
operational internal audits.
The Audit Committee believes that the foregoing expenditures are compatible
with maintaining the independence of the Company's public accountants.
The Audit Committee has adopted procedures for pre-approving all audit and
permissible non-audit services provided by the independent registered public
accountants. The Audit Committee will annually review and pre-approve the audit,
review and attest services to be provided during the next audit cycle by the
independent registered public accountants and may annually review and
pre-approve permitted non-audit services to be provided during the next audit
cycle by the independent registered public accountants. To the extent
practicable, the Audit Committee will also review and approve a budget for such
services. Services proposed to be provided by the independent registered public
accountants that have not been pre-approved during the annual review and the
fees for such proposed services must be pre-approved by the Audit Committee or
its designated subcommittee. Additionally, fees for previously approved services
that are expected to exceed the previously approved budget must also be
pre-approved by the Audit Committee or its designated subcommittee. All requests
or applications for the independent registered public accountants to provide
services to the Company shall be submitted to the Audit Committee or its
designated subcommittee by the Chief Financial Officer or Controller and must
address whether, in his or her view, the request or application is consistent
with applicable laws, rules and regulations relating to auditor independence.
Audit Committee
Jerry D. Carlisle, Chairman
John C. Bumgarner, Member
Harold D. Carter, Member
John G. Phillips, Member
20
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative return (assuming
reinvestment of any dividends) for (i) the Company, (ii) the S&P 500 Index, and
(iii) the Company's peer group composed of eleven (11) independent oil and gas
exploration and production companies with activities focused in the Gulf of
Mexico region (ATP Oil & Gas Corporation, Cabot Oil & Gas Corporation, Comstock
Resources, Inc., Denbury Resources Inc., Houston Exploration Company, Newfield
Exploration Company, Remington Oil and Gas Corporation, St. Mary Land &
Exploration Company, Spinnaker Exploration Company, Stone Energy Corporation,
The Meridian Resource Corporation) which the Company believes compete with the
Company and are believed by the Company to be companies that analysts would most
likely use to compare with an investment in the Company. One company, Westport
Resources Corporation, included in our 2003 peer group has been removed in 2004,
as it was acquired by another company.
COMPARISON OF 50 MONTH CUMULATIVE TOTAL RETURN*
AMONG ENERGY PARTNERS, LTD., THE S&P 500 INDEX AND A PEER GROUP
(PERFORMANCE GRAPH)
---------------
* $100 invested on 11/2/00 in stock or on 10/31/00 in index -- including
reinvestment of dividends. Fiscal year ending December 31.
------------------------------------------------------------------------------------
11/2/00 12/00 12/01 12/02 12/03 12/04
------------------------------------------------------------------------------------
Energy Partners, Ltd. 100.00 83.75 50.33 71.33 92.67 135.13
S&P 500 100.00 92.57 81.57 63.54 81.77 90.66
Peer Group 100.00 134.32 100.91 94.31 123.71 170.68
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers, directors and
persons who own more than ten percent (10%) of the Company's Common Stock to
file initial reports of ownership and changes in ownership with the Securities
and Exchange Commission. To the Company's knowledge, with respect to the year
ended December 31, 2004, all applicable filings were made timely other than one
late report by Mr. Carter.
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Gershen is a managing director of the general partner of Energy Income
Fund, L.P. ("EIF"), which owned more than 5% of our outstanding Common Stock
until November 2004. In November 2004, we sold 3,467,144 shares of our common
stock to the public at a sales price of $57,377,766, and purchased an equal
number of shares from EIF at the same price. We have been informed by the NYSE
that this transaction did not cause Mr. Gershen to cease to be independent under
the independence guidelines of its corporate governance rules.
OTHER MATTERS
Management of the Company is not aware of other matters to be presented for
action at the 2005 Annual Meeting; however, if other matters are presented, it
is the intention of the persons named in the accompanying proxy card to vote in
accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS FOR THE 2006 ANNUAL MEETING
Stockholder proposals intended to be included in the Proxy Statement
relating to the Company's 2006 Annual Meeting pursuant to Rule 14a-8 ("Rule
14a-8") under the Exchange Act must be received by the Corporate Secretary of
the Company no later than December 5, 2005 and must otherwise comply with Rule
14a-8.
Any stockholder proposals received outside of the Rule 14a-8 procedure for
consideration at the Company's 2006 Annual Meeting must be delivered to the
Corporate Secretary of the Company no later than March 11, 2006, but no earlier
than February 9, 2006. If such timely notice of a stockholder proposal is not
given, the proposal may not be brought before the 2006 Annual Meeting. If timely
notice is given but is not accompanied by a written statement to the extent
required by applicable securities laws, the Company may exercise discretionary
voting authority over proxies with respect to such proposal, if presented at the
2006 Annual Meeting.
Stockholder proposals for nominees for directors must comply with the
procedures set forth in Section 2.10 of the Company's By-laws. In order to
recommend a nominee for a director position, a stockholder must be a stockholder
of record at the time of giving notice and must be entitled to vote at the
meeting at which such nominee will be considered. Stockholder recommendations
must be made pursuant to written notice delivered to the Secretary at the
principal executive offices of the Company (i) in the case of a nomination for
election at an annual meeting, not later than 60 days nor earlier than 90 days
prior to the first anniversary of the preceding year's annual meeting; and (ii)
in the case of a special meeting at which directors are to be elected, not
earlier than the close of business on the 90th day prior to such special meeting
and not later than the close of business on the later of the 60th day prior to
such special meeting or the tenth day following the day on which public
announcement is first made of the date of the meeting and of the nominees
proposed by the Board of Directors to be elected at the special meeting. In the
event that the date of the annual meeting is changed by more than 30 days from
the anniversary date of the preceding year's annual meeting, the stockholder
notice described above will be deemed timely if it is received not earlier than
the close of business on the 90th day prior to such annual meeting and not later
than the close of business on the later of the 60th day prior to such annual
meeting or the tenth day following the day on which public announcement of the
date of such meeting is first made.
The stockholder notice must set forth the following:
- As to each person the stockholder proposes to nominate for election as a
director, (i) the name, age, business address and residence address of
the person, (ii) the principal occupation and employment of the person,
(iii) the class or series and number of shares of capital stock of the
Company which are owned beneficially or of record by the person and (iv)
all information relating to such person that would be required to be
disclosed in solicitations of proxies for the election of directors
pursuant to
22
Regulation 14A under the Exchange Act and Rule 14a-11 thereunder, including such
person's written consent to being named as a nominee and to serving as a
director if elected, and
- As to the nominating stockholder and the beneficial owner, if any, of
such stock, (i) such stockholder's and beneficial owner's, name and
address as they appear on the Company's books, (ii) the class and number
of shares of the Company's capital stock which are owned beneficially or
of record by such stockholder and such beneficial owner, (iii) a
description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be
made by such stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to nominate
the person named in its notice, (v) a representation whether the
stockholder or the beneficial owner, if any, intends or is part of a
group which intends to (a) deliver a proxy statement and/or form of proxy
to holders of at least the percentage of the Company's outstanding
capital stock required to elect the nominee and/or (b) otherwise solicit
proxies from stockholders in support of such nomination and (vi) any
other information relating to such stockholder that would be required to
be disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act, and the rules and regulations
promulgated thereunder.
In addition to complying with the foregoing procedures, any stockholder
nominating a director must comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder. Recommendations must also
include a written statement from the candidate expressing a willingness to
serve.
PLEASE SIGN, DATE, AND RETURN YOUR PROXY PROMPTLY TO AVOID UNNECESSARY
EXPENSE. ALL STOCKHOLDERS ARE URGED, REGARDLESS OF THE NUMBER OF SHARES OWNED,
TO PARTICIPATE IN THE 2005 ANNUAL MEETING BY RETURNING THEIR PROXY IN THE
ENCLOSED BUSINESS REPLY ENVELOPE.
By Order of the Board of Directors
/s/ Richard A. Bachmann
RICHARD A. BACHMANN
Chairman of the Board
President and Chief Executive Officer
New Orleans, Louisiana
April 4, 2005
23
ANNEX A
ENERGY PARTNERS, LTD.
DIRECTOR INDEPENDENCE STANDARDS
The Board of Directors of Energy Partners, Ltd. (the "Company") has adopted
the following standards to assist it in making determinations of independence in
accordance with the NYSE Corporate Governance rules.
EMPLOYMENT RELATIONSHIPS
A director will be deemed to be independent unless, within the preceding
three years:
- such director
- is or was an employee of the Company or any of the Company's
subsidiaries, other than an interim Chairman or Chief Executive Officer
or other executive officer;
- is a current partner of the Company's internal or external auditor;
- is a current employee of the Company's internal or external auditor; or
- was (but is no longer) a partner or employee of the Company's internal
or external auditor who personally worked on the Company's audit within
that time.
- any immediate family member of such director
- is or was an executive officer of the Company or any of the Company's
subsidiaries;
- is a current partner of the Company's internal or external auditor;
- is a current employee of the Company's internal or external auditor who
participates in the firm's audit, assurance or tax compliance (but not
tax planning) practice; or
- was (but is no longer) a partner or employee of the Company's internal
or external auditor who personally worked on the Company's audit within
that time.
COMPENSATION RELATIONSHIPS
A director will be deemed to be independent unless, within the preceding
three years:
- such director has received during any twelve-month period more than
$100,000 in direct compensation from the Company or any of its
subsidiaries other than: (i) director and committee fees; (ii) pension or
other forms of deferred compensation for prior service; provided,
however, that such compensation is not contingent in any way on continued
service; and (iii) compensation received for former service as an interim
Chairman or Chief Executive Officer or other executive officer; or
- an immediate family member of such director has received during any
twelve-month period more than $100,000 in direct compensation from the
Company or any of its subsidiaries as a director or executive officer
other than: (i) director and committee fees and (ii) pension or other
forms of deferred compensation for prior service; provided, however, that
such compensation is not contingent in any way on continued service.
COMMERCIAL RELATIONSHIPS
A director will be deemed to be independent unless:
- such director is a current employee of another company that has made
payments to, or received payments from, the Company or any of its
subsidiaries for property or services in an amount which, in
A-1
any of the last three fiscal years, exceeds the greater of $1 million or
2% of such other company's consolidated gross revenues; or
- an immediate family member of such director is a current executive
officer of another company that has made payments to, or received
payments from, the Company or any of its subsidiaries for property or
services in an amount which, in any of the last three fiscal years,
exceeds the greater of $1 million or 2% of such other company's
consolidated gross revenues.
CHARITABLE RELATIONSHIPS
A director will be deemed to be independent unless such director is an
executive officer of a tax-exempt organization that, within the preceding three
years, received contributions from the Company or any of its subsidiaries in an
amount which, in any single fiscal year, exceeded the greater of $1 million or
2% of such tax-exempt organization's consolidated gross revenues; unless the
Board determines such relationships not to be material or otherwise consistent
with a Director's independence.
INTERLOCKING DIRECTORATES
A director will be deemed to be independent unless, within the preceding
three years:
- such director is or was employed as an executive officer of another
company where any of the Company's or its subsidiaries' present executive
officers at the same time serves or served on that company's compensation
committee; or
- an immediate family member of such director is or was employed as an
executive officer of another company where any of the Company's or its
subsidiaries' present executives at the same time serves or served on
that company's compensation committee;
OTHER RELATIONSHIPS
For relationships not specifically mentioned above, the determination of
whether a director has a material relationship with the Company (either directly
or as a partner, shareholder or officer of an organization that has a
relationship with the Company), and therefore would not be independent, will be
made by the Board of Directors after taking into account all relevant facts and
circumstances. For purposes of these standards, a director who is solely a
director and/or a non-controlling shareholder of another company that has a
relationship with the Company will not be considered to have a material
relationship based solely on such relationship that would impair such director's
independence.
For purposes of the standards set forth above, "immediate family member"
means any of such director's spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law and brothers and sisters-in-law (other
than those who are no longer family members as a result of legal separation or
divorce, or those who have died or become incapacitated) and anyone (other than
a domestic employee) who shares such director's home. For purposes of the
standards set forth above, "executive officer" means the Company's president,
principal financial officer, principal accounting officer (or, if there is no
such accounting officer, the controller), any vice-president of the Company in
charge of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the Company. Officers of the Company's subsidiaries shall be deemed officers of
the Company if they perform such policy-making functions for the Company.
These standards shall be interpreted in a manner consistent with the New
York Stock Exchange Corporate Governance Rules.
A-2
ANNEX B
ENERGY PARTNERS, LTD.
AMENDED AND RESTATED 2000 STOCK INCENTIVE PLAN FOR
NON-EMPLOYEE DIRECTORS
ARTICLE I
PURPOSES
The purposes of the Amended and Restated Energy Partners, Ltd. 2000 Stock
Incentive Plan for Non-Employee Directors (the "Plan") are to attract and retain
the services of experienced and knowledgeable non-employee directors of Energy
Partners, Ltd. (the "Company") and to provide an incentive for such directors to
increase their proprietary interests in the Company's long-term success and
progress.
ARTICLE II
SHARES SUBJECT TO THE PLAN
Subject to adjustment in accordance with Article VI hereof, the total
number of shares of the Company's common stock, $0.01 par value per share (the
"Shares"), for which awards may be granted under the Plan is 500,000. The Shares
shall be shares presently authorized but unissued or subsequently acquired by
the Company. If any awards under the Plan are forfeited, canceled, terminated,
exchanged or surrendered or such award is settled in cash or otherwise
terminates without a distribution of Shares to the Eligible Director, any Shares
counted against the number of Shares reserved and available under the Plan with
respect to such award shall, to the extent of any such forfeiture, settlement,
termination, cancellation, exchange or surrender, again be available for awards
under the Plan.
ARTICLE III
ADMINISTRATION OF THE PLAN
The administrator of the Plan (the "Plan Administrator") shall be the
Compensation Committee of the Board of Directors of the Company (the "Board") or
such other Board committee as may be designated by the Board to administer the
Plan. Subject to the terms of the Plan, the Plan Administrator shall have the
power to determine whether to grant to an Eligible Director under the Plan stock
options, restricted share units or both or neither, the number of stock options
and/or restricted share units to be granted, and the terms and conditions of the
stock options and restricted share units (consistent with the terms of the
Plan), to construe the provisions of the Plan, to determine all questions
arising thereunder and to adopt, amend and rescind such rules and regulations
for the administration of the Plan as it may deem desirable. All determinations
made by the Plan Administrator in connection with the Plan and any awards
granted thereunder shall be final and binding upon all Eligible Directors and
their successors in interest. No member of the Plan Administrator shall
participate in any vote by the Plan Administrator on any matter materially
affecting the rights of any such member under the Plan.
ARTICLE IV
GRANTS OF STOCK OPTIONS
Each member of the Board elected or appointed who is not otherwise an
employee of the Company or any subsidiary (an "Eligible Director") shall be
eligible to receive stock option grants under the Plan. The
B-1
Plan Administrator is authorized to grant stock options to Eligible Directors on
the following terms and conditions:
1. OPTION AGREEMENT
Each option granted under the Plan shall be evidenced by an option
agreement (the "Option Agreement") duly executed on behalf of the Company. Each
Option Agreement shall comply with and be subject to the terms and conditions of
the Plan. Any Option Agreement may contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the Plan
Administrator.
2. OPTION EXERCISE PRICE
The option exercise price for an option granted under the Plan shall be the
fair market value of the Shares covered by the option at the time the option is
granted. For purposes of the Plan, "fair market value" shall mean the fair
market value as determined by such methods and procedures as shall be
established from time to time by the Plan Administrator. If the Shares are
listed on any established stock exchange or a national market system, unless
otherwise determined by the Plan Administrator in good faith, such fair market
value of a Share shall mean the closing price of the Share on the date on which
it is to be valued hereunder (or, if the Shares were not traded on that date,
the next preceding day that the Shares were traded) on the principal exchange on
which the Shares are traded, as such prices are officially quoted on such
exchange.
3. TIME AND MANNER OF EXERCISE OF OPTION
Each option shall become fully exercisable on the first anniversary of the
date of grant, provided the optionee continues as a director of the Company
throughout that one-year period. Prior to the first anniversary of the date of
grant of an option, the option shall be exercisable as to a number of Shares
covered by the option determined by (i) multiplying the number of Shares covered
by the option by a fraction the numerator of which is the number of days that
the optionee has served as a director of the Company on or after the date of
grant up to and including the determination date and the denominator of which is
365, and (ii) rounding down to the nearest whole number. Any portion of an
option that has not become exercisable prior to the cessation of the optionee's
service as a director for any reason shall not thereafter become exercisable.
Each option to the extent then exercisable may be exercised in whole or in part
at any time and from time to time; provided, however, that no fewer than 100
Shares (or the remaining Shares then purchasable under the option, if less than
100 Shares) may be purchased upon any exercise of option rights hereunder and
that only whole Shares will be issued pursuant to the exercise of any option.
Any option may be exercised by giving written notice, signed by the person
exercising the option, to the Company stating the number of Shares with respect
to which the option is being exercised, accompanied by payment in full for such
Shares, which payment may be in whole or in part (i) in cash or by check, (ii)
in shares of Common Stock already owned for at least six (6) months by the
person exercising the option, valued at fair market value (as defined in Section
2) at the time of such exercise, or (iii) by delivery of a properly executed
exercise notice, together with irrevocable instructions to a broker, to properly
deliver to the Company the amount of sale or loan proceeds to pay the exercise
price, all in accordance with the regulations of the Federal Reserve Board.
4. TERM OF OPTIONS
Each option shall expire on the earlier of (i) ten (10) years from the date
of the granting thereof, or (ii) thirty-six (36) months after the date the
optionee ceases to be a director of the Company for any reason.
5. TRANSFERABILITY
During an optionee's lifetime, an option may be exercised only by the
optionee. In the event of the death of an optionee prior to the expiration of an
option as described in Section 4, such option shall be exercisable after the
date of the optionee's death for the balance of the period up to its expiration
as described in Section 4, by any person or persons whom the optionee shall have
designated in writing on forms prescribed by
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and filed with the Company or, if no such designation has been made, by the
person or persons to whom the optionee's rights have passed by will or the laws
of descent and distribution. Options granted under the Plan and the rights and
privileges conferred thereby shall not be subject to execution, attachment or
similar process and may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than by will or by
the applicable laws of descent and distribution, except that the Plan
Administrator may permit a recipient of an option to designate in writing during
the optionee's lifetime a beneficiary to receive and exercise options in the
event of the optionee's death. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under the Plan or of any right or
privilege conferred thereby, contrary to the provisions of the Plan, or the sale
or levy or any attachment or similar process upon the rights and privileges
conferred hereby, shall be null and void.
6. PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDER
Neither the recipient of an option under the Plan nor the optionee's
successor(s) in interest shall have any rights as a stockholder of the Company
with respect to any Shares subject to an option granted to such person until
such person becomes a holder of record of such Shares.
ARTICLE V
GRANTS OF RESTRICTED SHARE UNITS
Each Eligible Director shall be eligible to receive grants of restricted
share units under the Plan. The Plan Administrator is authorized to grant
restricted share units to Eligible Directors on the following terms and
conditions:
1. NATURE OF RESTRICTED SHARE UNIT AND RESTRICTED SHARE UNIT AGREEMENT
Each restricted share unit shall represent the right to receive one Share
upon the earlier to occur of: (i) the cessation of the Eligible Director's
service as a director of the Company for any reason, or (ii) the occurrence of a
change of control of the Company within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended, and any regulations and Internal
Revenue Service guidance thereunder (the "Payment Event"). Each restricted share
unit shall be evidenced by a restricted share unit agreement (the "RSU
Agreement") duly executed on behalf of the Company. Each RSU Agreement shall
comply with and be subject to the terms and conditions of the Plan. Any RSU
Agreement may contain such other terms and conditions not inconsistent with the
Plan as may be determined by the Plan Administrator.
2. VESTING AND FORFEITURE
An Eligible Director shall become 100% vested in a grant of restricted
share units on the first anniversary of the date of grant, provided the Eligible
Director continues as a director of the Company throughout that one-year period.
Prior to the first anniversary of the date of grant of restricted share units,
an Eligible Director shall be vested in a number of restricted share units
determined by (i) multiplying the number of restricted share units included in
such grant by a fraction the numerator of which is the number of days that the
Eligible Director has served as a director of the Company on or after the date
of grant up to and including the determination date and the denominator of which
is 365, and (ii) rounding down to nearest whole number. If the service of an
Eligible Director ceases for any reason prior to the first anniversary of the
date of grant of restricted share units, the Eligible Director shall forfeit any
restricted share units that have not vested as of the date of the Eligible
Director's cessation of service as a Director.
3. DIVIDEND EQUIVALENTS
If the record date for any cash dividends on Shares falls during the period
beginning on the date of grant of restricted share units to an Eligible Director
and ending on occurrence of the Payment Event, the Eligible Director shall
receive a grant of an additional number of restricted share units determined by
(i) calculating the cash dividends that the Eligible Director would have
received if he or she had owned a number of Shares
B-3
equal to the number of his or her restricted share units, (ii) dividing the
amount of such cash dividends by the fair market value (as defined in Section 2
of Article IV) of a Share on the actual payment date for such dividends, and
(iii) rounding down to the nearest whole number. Such additional restricted
share units shall have the same terms as the restricted share units to which
they relate.
4. PAYMENT OF VESTED RESTRICTED SHARE UNITS
Upon the occurrence of a Payment Event, the Eligible Director (or, in the
event of the Eligible Director's death, his or her beneficiary) shall be
entitled to receive a number of Shares equal to the number of restricted share
units in which the Eligible Director has vested at the time of the Payment
Event. For this purpose, the Eligible Director's beneficiary shall be the person
or persons designated by the Eligible Director on a form prescribed by and most
recently filed with the Plan Administrator, or if no effective beneficiary
designation is then in effect, the Eligible Director's estate.
5. TRANSFERABILITY
Restricted share units granted under the Plan shall not be subject to
execution, attachment or similar process and may not be transferred, assigned,
pledged or hypothecated in any manner (whether by operation of law or otherwise)
other than by will or applicable laws of descent and distribution, except that
the Plan Administrator shall permit an Eligible Director to designate in writing
during the Eligible Director's lifetime a beneficiary to receive the Shares
representing vested restricted share units where the Payment Event is the death
of the Eligible Director. Any attempt to transfer, assign, pledge, hypothecate,
attach or otherwise dispose of any restricted share unit under the Plan contrary
to the provisions of the Plan, shall be null and void.
6. ELIGIBLE DIRECTOR'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDER
Neither the Eligible Director holding a restricted share unit nor the
Eligible Director's successor(s) in interest shall have any rights as a
stockholder of the Company with respect to any Shares represented by restricted
share units granted to such Eligible Director until such person becomes a holder
of record of such Shares.
ARTICLE VI
CAPITAL ADJUSTMENTS
In the event of a recapitalization, stock split, stock dividend, exchange
of shares, merger, reorganization, change in corporate structure or shares of
the Company or similar event, the Board may make such adjustments as it deems
appropriate in the aggregate number and kind of shares for which awards may be
granted under the Plan, the number and kind of shares covered by each
outstanding award and the exercise price per share of each outstanding option.
In the event of any adjustment in the number of shares covered by any
award, any fractional shares resulting from such adjustment shall be disregarded
and each such award shall cover only the number of full shares resulting from
such adjustment.
ARTICLE VII
GENERAL PROVISIONS
1. LIMITATION AS TO DIRECTORSHIP
Neither the Plan nor the granting of an option or restricted share unit nor
any other action taken pursuant to the Plan shall constitute or be evidence of
any agreement or understanding, express or implied, that an Eligible Director
has a right to continue as a director for any period of time or at any
particular rate of compensation.
B-4
2. REGULATORY APPROVAL AND COMPLIANCE
The Company shall not be required to issue any certificate or certificates
for Shares under the Plan, or record as a holder of record of Shares the name of
the individual exercising an option or entitled to receive Shares in respect of
a grant of restricted share units under the Plan, without obtaining to the
complete satisfaction of the Plan Administrator the approval of all regulatory
bodies deemed necessary by the Plan Administrator, and without complying, to the
Plan Administrator's complete satisfaction, with all rules and regulations under
federal, state or local law deemed applicable by the Plan Administrator.
ARTICLE VIII
EXPENSES OF THE PLAN
All costs and expenses of the adoption and administration of the Plan shall
be borne by the Company; none of such expenses shall be charged to the Eligible
Director.
ARTICLE IX
DURATION OF THE PLAN
The Plan shall continue in effect until it is terminated by action of the
Board or the Company's stockholders, but such termination shall not affect the
terms of any then outstanding awards.
ARTICLE X
TERMINATION AND AMENDMENT OF THE PLAN
The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that no such amendment, termination
or suspension may impair the rights of an Eligible Director under any award
theretofore granted without the Eligible Director's consent.
ARTICLE XI
GOVERNING LAW
The validity, construction, and effect of the Plan, any rules and
regulations relating to the Plan, and any Option Agreement or RSU Agreement
shall be determined in accordance with the laws of Delaware without giving
effect to principles of conflicts of laws.
B-5
ANNEX C
ENERGY PARTNERS, LTD.
AUDIT COMMITTEE CHARTER
The purpose of the Audit Committee, in its capacity as a committee of the
Board, is to assist the Board in overseeing (1) the integrity of the financial
statements of the Company, (2) the independent auditor's qualifications and
independence, (3) the performance of the Company's internal audit function and
independent auditor and (4) the compliance by the Company with legal and
regulatory requirements.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the responsibility or duty of the Audit Committee to:
certify the Company's financial statements, guarantee the auditor's report, plan
or conduct audits or determine that the Company's financial statements and
disclosures are complete and accurate or are in accordance with generally
accepted accounting principles or applicable rules and regulations. It is also
not the responsibility of the Audit Committee to assure compliance with laws and
regulations or with the Company's Code of Business Ethics, or to set or
determine the adequacy of the Company's reserves. These are the responsibilities
of management and the independent auditor, as appropriate.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, independent or outside
legal, accounting, or other consultants or experts of its choice as it deems
necessary or appropriate in the performance of its duties. The Audit Committee
may request any officer or employee of the Company or the Company's counsel or
independent auditor to attend any meeting of the Audit Committee or to meet with
any members of, or consultants to, the Audit Committee. The Audit Committee
shall meet periodically with management, the internal auditors and the
independent auditor in separate executive sessions.
AUDIT COMMITTEE COMPOSITION
The members of the Audit Committee shall be appointed annually by the Board
on the recommendation of the Nominating & Governance Committee. The Audit
Committee shall consist of no fewer than three members. The members of the Audit
Committee shall meet the independence requirements of the New York Stock
Exchange, the Securities and Exchange Commission and other applicable laws,
rules and regulations. No Audit Committee member shall simultaneously serve on
the audit committee of more than two other public companies unless the Board of
Directors determines that such simultaneous service would not impair the ability
of that Audit Committee member effectively to serve on the Audit Committee.
The members of the Audit Committee may be replaced by the Board.
The Audit Committee members must be financially literate, as such
qualification is interpreted by the Board in its business judgment. In addition,
at least one member must have accounting or related financial management
expertise, as the Board interprets such qualification in its business judgment.
The Audit Committee must have at least one member who is an "audit
committee financial expert," as defined by the SEC, on or prior to the date
required by the SEC.
The Audit Committee may delegate authority to an individual member of the
committee or to subcommittees to the extent permitted by applicable laws, rules
and regulations, including those of the New York Stock Exchange.
A Chairperson may be elected by the Board.
C-1
RESPONSIBILITIES OF AUDIT COMMITTEE
GENERAL
1. Meet to review and discuss with management and the independent auditor
the annual audited financial statements, including reviewing the specific
disclosures made in management's discussion and analysis, and any related
certifications required to be made by any officer of the Company, and recommend
to the Board whether the audited financial statements should be included in the
Company's Form 10-K.
2. Meet to review and discuss with management and the independent auditor
the Company's quarterly financial statements, including reviewing the specific
disclosures made in management's discussion and analysis and any related
certifications required to be made by any officer of the Company, prior to the
filing of its Form 10-Q, including the results of the independent auditor's
reviews of the quarterly financial statements.
3. Discuss with management and the independent auditor (a) major issues
regarding accounting principles and financial statement presentations, including
any significant changes in the Company's selection or application of accounting
principles, and major issues as to the adequacy of the Company's internal
controls and any special audit steps adopted in light of material control
deficiencies, (b) analyses prepared by management and/or the independent auditor
setting forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including analyses
of the effects of alternative GAAP methods on the financial statements and (c)
the effect of regulatory and accounting initiatives, as well as off-balance
sheet structures, on the Company's financial statements.
4. Discuss with management the Company's earnings press releases, as well
as financial information and earnings guidance provided to analysts and rating
agencies. The Audit Committee's responsibility to discuss earnings releases as
well as financial information and earnings guidance may be done generally (i.e.,
discussion of the types of information to be disclosed and the type of
presentation to be made, particularly any "pro forma" or "adjusted" non-GAAP
information). The Audit Committee need not discuss in advance each earnings
release or each instance in which the Company may provide earnings guidance.
5. Discuss with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures, including
the Company's risk assessment and risk management policies.
6. Review annually with management and the independent auditors the
Company's Code of Business Ethics, as well as review the actions taken to
monitor compliance with the Code of Business Ethics.
7. Review any exceptions to the Company's Code of Business Ethics and the
actions management has taken to resolve the exceptions.
8. Review with the Company's counsel any legal, regulatory and
environmental matters that may have a material impact on the Company's financial
statements.
9. Review the responsibilities, budget and staffing of the Company's
internal audit program, including the proposed annual audit plan, periodic
progress reports on the status of the plan, and summaries of any significant
issues raised during the performance of internal audits.
10. Review and assess compliance with all applicable rules and regulations
of the SEC and the New York Stock Exchange specifically applicable to the
composition and responsibilities of the Audit Committee.
INDEPENDENT AUDITORS
1. The Audit Committee shall be directly responsible for the appointment,
compensation (including as to fees and terms) and retention of the independent
auditor and for oversight of the work of the independent auditor (including
resolution of disagreements between management and the auditor regarding
financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company. The
independent auditor shall report directly to the Audit Committee. The
performance of any audit or permitted non-audit services by the independent
auditor shall be subject to prior approval in accordance with applicable laws,
rules or regulations.
C-2
2. Review the experience and qualifications of the lead partner of the
independent auditor.
3. Obtain and review a report from the independent auditor at least
annually describing (a) the auditor's internal quality-control procedures, (b)
any material issues raised by the most recent quality-control review, or peer
review, of the firm, or by any inquiry or investigation by governmental or
professional authorities within the preceding five years respecting one or more
independent audits carried out by the firm and any steps taken to deal with any
such issues, and (c) (to assess the auditor's independence), all relationships
between the independent auditor and the Company. After reviewing such report and
the independent auditor's work throughout the year, evaluate the qualifications,
performance and independence of the independent auditor, taking into account the
opinions of management and the Company's internal auditors. In addition to
assuring the regular rotation of the lead (or coordinating) audit partner
(having primary responsibility for the audit) as required by law, the Audit
Committee shall consider whether, in order to assure continuing auditor
independence, there should be regular rotation of the audit firm itself. The
Audit Committee shall present its conclusions to the Board and take any actions
deemed necessary or desirable by the Audit Committee to satisfy itself as to the
qualifications, performance and independence of the independent auditor.
4. Set clear policies for the Company's hiring of employees or former
employees of the independent auditor, but in no event shall any such employee
who has participated in any capacity in the audit of the Company be hired in a
management position with the Company during the one year period preceding the
date of the initiation of the Company's most recent audit.
5. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit. In particular, discuss:
(a) The adoption of, or changes to, the Company's significant auditing
and accounting principles and practices as suggested by the independent
auditor, internal auditors or management;
(b) Any management or internal control letter provided, or proposed to
be provided, by the independent auditor and the Company's response to that
letter; and
(c) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
requested information, and any significant disagreements with management.
6. Receive, and take any required or appropriate action in relation to, all
reports and other communications which the independent auditor is required to
make to the Audit Committee, including timely reports concerning:
(a) all critical accounting policies and practices to be used;
(b) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
management officials of the Company, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by the
independent auditor; and
(c) other material written communications between the independent
auditor and the management of the Company, such as any management letter or
schedule of unadjusted differences.
7. Discuss with the independent auditors their judgments about the quality,
not just the acceptability, of the Company's accounting principles as applied in
its financial reporting.
8. Review with the independent auditor any audit problems or difficulties
and management's response.
OTHER AUDIT COMMITTEE RESPONSIBILITIES
1. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls, or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
2. Annually prepare an audit committee report as required by the SEC to be
included in the Company's annual proxy statement.
C-3
3. Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the Audit Committee or the Board deems necessary
or appropriate.
4. The Audit Committee shall make regular reports to the Board.
5. The Audit Committee shall annually review the Audit Committee's own
performance.
6. The Audit Committee shall review and reassess the adequacy of this
Charter annually and recommend any proposed changes to the Board for approval.
MEETINGS
The Audit Committee may meet as often as may be necessary or appropriate,
but must meet at least quarterly. Meetings may be called by the Chairperson of
the Committee and/or the President and Chief Executive Officer of the Company.
All meetings of the Audit Committee shall be held pursuant to the Bylaws of the
Company with regard to notice and waiver thereof, and written minutes of each
meeting shall be duly filed in the Company's records. Reports of meetings of the
Audit Committee shall be made to the Board at its next regularly scheduled
meeting following the Audit Committee meeting accompanied by any recommendations
to the Board approved by the Audit Committee.
C-4
ENERGY PARTNERS, LTD.
PROXY FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
undersigned stockholder of Energy Partners, Ltd., a Delaware corporation
("EPL"), hereby appoints Richard A. Bachmann and John G. Phillips, or either of
them, as proxies, each with power to act without the other and with full power
of substitution, on behalf of the undersigned to vote the number of shares of
Common Stock of EPL that the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders of Energy Partners, Ltd. to be
held on Thursday, May 12, 2005 at 9:00 a.m. Central Daylight Time, at the Hotel
InterContinental New Orleans, Vieux Carre B Room, 444 St. Charles Ave., New
Orleans, Louisiana 70130 and at any adjournment or postponement thereof, on the
following matters:
(Continued and to be signed on the other side)
--------------------------------------------------------------------------------
Address Change/Comments (Mark the corresponding box on the reverse side)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOU CAN NOW ACCESS YOUR ENERGY PARTNERS, LTD. ACCOUNT ONLINE.
Access your Energy Partners, Ltd., stockholder account online via Investor
ServiceDirect(R) (ISD).
Mellon Investor Services LLC, Transfer Agent for Energy Partners, Ltd., now
makes it easy and convenient to get current information on your stockholder
account.
- View account status - View payment history for dividends
- View certificate history - Make address changes
- View book-entry information - Obtain a duplicate 1099 tax form
- Establish/change your PIN
VISIT US ON THE WEB AT HTTP://WWW.MELLONINVESTOR.COM
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN 9AM-7PM
MONDAY-FRIDAY EASTERN TIME
Please [ ]
Mark Here
for Address
Change or
Comments
SEE REVERSE SIDE
(1) Proposal to approve the election of the following ten (10)
nominees for membership on the Company's Board of Directors:
Messrs. 01 Richard A. Bachmann; 02 John C. Bumgarner, Jr.;
03 Jerry D. Carlisle; 04 Harold D. Carter; 05 Enoch L. Dawkins;
06 Robert D. Gershen; 07 William R. Herrin; 08 William O. Hiltz;
09 John G. Phillips; and 10 Dr. Norman D. Francis FOR AGAINST ABSTAIN
(2) To approve the Amended and [ ] [ ] [ ]
EACH TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS IN THE Restated 2000 Stock Incentive
YEAR 2005, AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND Plan for Non-Employee Directors.
QUALIFIED.
(3) To ratify the appointment of FOR AGAINST ABSTAIN
FOR WITHHOLD KPMG LLP as the Company's [ ] [ ] [ ]
[ ] [ ] independent registered public
accountants for the year
To withhold authority to vote for any nominee, write the name of ended December 31, 2005.
that nominee in the space provided below
(4) To transact such other business as may properly come
before the meeting and any adjournment or postponement
----------------------------------------- thereof.
PLEASE MARK, SIGN, DATE AND RETURN USING
THE ENCLOSED ENVELOPE. This proxy, when properly executed, will be voted in
the manner directed herein by the undersigned
stockholder. IF NO DIRECTION IS MADE, THIS PROXY
__________ WILL BE VOTED "FOR" PROPOSALS 1, 2 AND 3. Receipt
| of the proxy statement, dated April 4, 2005, is hereby
| acknowledged.
|
| You are encouraged to specify your choices by marking
the appropriate boxes, SEE REVERSE SIDE, but you need
not mark any boxes if you wish to vote in accordance
with the board of directors' recommendation. The
proxies cannot vote your shares unless you sign and
return this card.
Please sign your name exactly as it appears hereon.
Joint owners must each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give your full title as it
appears thereon.
Signature __________________________________________ Signature __________________________________________ Date __________________
Please sign your name exactly as it appears hereon. Joint owners must each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title as it appears thereon.
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FOLD AND DETACH HERE